I am about to start letting the three-bedroom house that has been my family home. What kind of insurance do I need?
Steve White, Manchester
Your standard home insurance is likely to be invalid if you let your property, so check your policy. As a minimum, take out landlord buildings insurance (from about £250 a year), which covers the structure of your property against fire, subsidence, floods and weather. Without that, you stand to lose it all — and you’d still have to pay the mortgage. Even if you own outright, it’s not a risk worth taking.
Good landlord buildings policies also cover loss of rent and the cost of temporary accommodation (if a flood makes the house uninhabitable, for instance). Liability insurance, which protects you if a tenant or tradesman falls down the stairs and sues you, can be added for a small charge.
Landlord contents insurance is important if you intend to let your property furnished. It also covers appliances and certain finishes, such as carpets in unfurnished rentals. As there is usually an excess and a single-item limit, it could make more sense to pay repair costs yourself. Your tenants are responsible for insuring their own belongings.
What about rent guarantee insurance (RGI)? In principle, this removes your greatest landlord worry: if your tenant doesn’t pay rent, the insurer will. It also enforces discipline, as insurers check tenant references themselves and will only accept those who pass with flying colours. This eliminates the temptation to take on a friend of a friend without checks, only to find they are a serial non-payer.
If you do buy RGI (about £50 a year), pick a policy that includes legal expenses for evicting a tenant. And check the fine print — some policies kick in only after a month in arrears, then take a second month as excess, and tap the deposit first. Some limit the amount of rent that can be guaranteed (£2,500 a month, for example), the number of months (typically six) or the tenant type (no students, say). Many have to be renewed for each new tenancy, even with the same occupants, and you must tell the insurer right away if rent is late. In the end, insurance is no substitute for thorough referencing and going with your gut.
Daniel Lees is co-author of The Accidental Landlord and founder of the lettings specialist Swift (swift.property)
Q&A as published on The Sunday Times’ Home Help pages
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